The definitive repo operation will consist of the purchase of securities with the commitment to sell them at a future date. The collateral will include sovereign bonds, local and corporate debt.
The Chinese central bank announced this Monday the incorporation of definitive repurchase agreements as part of its monetary operations, with the aim of managing deadlines and maintaining adequate liquidity in the interbank market.
In a statement, the People’s Bank of China (PBOC) specified that these operations will be carried out monthly, with a maximum duration of one year, and the main market participants will participate in them.
The definitive repurchase operation will consist of purchase of securities with the commitment to sell them at a future date. Toward The collateral will include sovereign bonds, local and corporate debt..
The new instrument is added to existing ones, such as seven-day repurchase agreements and financing to banks through medium-term credit linesthat offer intermediate terms of three and six months.
With this measure, the central bank seeks optimize liquidity management before maturity of 1.45 billion yuan (188.4 billion euros) in medium-term loans in November and December, minimizing the need for downward adjustments in banks’ required reserves, according to data published by the financial news agency Bloomberg.
This initiative will also allow bonds used as collateral to continue circulating in the secondary market, thus reinforcing the security of lenders and aligning Chinese practices with international standards.
This further increases the flexibility of the country’s financial system and facilitates the entry of foreign investors into the interbank marketaccording to sector analysts, cited by the local newspaper The Paper.
The introduction of the definitive buyback occurs in a context of greater demand for liquidity at the end of the year and expectations of the issuance of budgetary stimuli that could increase public debt.
Last week, the People’s Bank of China announced a 25 basis point cut in the benchmark one-year interest rate to 3.1% to support the economy and reduce borrowing costs.
HE The last drop was in July, from 3.45% to 3.35%, the only reduction this yearin a context of caution given the divergence with other countries, where rates rose to contain inflation, which put pressure on the renminbi exchange rate.
However, Chinese authorities had already anticipated a change of course among the main central banks later this year, which would offer them more flexibility.
In recent weeks, Beijing announced a series of stimulus measures, following a reduction in interest rates in the United States and also following the publication of worse-than-expected August economic data, and Chinese President Xi Jinping called for greater efforts to achieve it. economic growth target for this year of around 5%.
Weak domestic and international demand, risks of deflation, a real estate crisis that has not yet come to an end and the lack of confidence among consumers and the private sector are some of the causes highlighted by analysts to explain the slowdown of the second country of the world. largest economy.
Source: Observadora
